Investing in a UK pension if i'm moving abroad

alexandros107

Looking to get people's opinion regarding UK pensions when there is a possibility of moving abroad. 

I've been living in the UK for the past three years (relocated from Netherlands) with the intention of settling here with my partner for good. I've been contributing into a UK pension and I have the flexibility to increase my contribution to take advantage of my employer funded contributions as well as tax relief benefits. Before I make a decision to increase my pension contributions to as high as I can possibly afford I have a small thought in the back of my head regarding the potential to relocating to another country in the future. I've relocated to different countries for work in the past so I have pensions from the Netherlands and Australia already. As much as I’d like to think that I’d be settling in the UK for good I also know that there might be a chance that I could relocate again in the future.

I'm wondering if there is any downside of locking in to a high contribution percentage if there is a chance I might be moving overseas in the future. My other option would be funnelling those funds into my investment ISA or even investing into real-estate.

 

Anybody know the benefits or downsides of investing in a UK pension rather than into more active investments if there is potential (not sure how likely at this point) I might not live in the UK for the rest of my life?

[Deleted User]

Anything to do with Vanguard as a provider they will close your account as soon as you move overseas (SIPP in drawdown, ISA, GIA).
Most other SIPPs and Company pension plans will allow you to keep the benefits, when you move you ask for your HMRC tax code to be Non Taxable, then you get taxed in the country of tax residency.
However in a different country Pension income may be taxed different than dividend income and capital gains, sometimes worse. The dividend income and capital gains will be from ISAs and a GIA and ISAs will not be recognised as a tax free vehicle just a normal GIA.
The rules for taking tax free cash are also different mostly for the worse (although nigelbb may be around in a minute to talk about France).
The benefits of the UK pension naturally are the tax relief going in.
You will have to crunch the numbers I am afraid, by looking at the tax treatments when you leave the UK.

andy001

uk02878- you say - Vanguard as a provider they will close your account as soon as you move overseas (SIPP in drawdown, ISA, GIA).= I didn't know that!
 How about others? If one is still paying taxes in the UK such as tax on rent of property etc- would they be able to keep the a/c open?

Dox

andy001 said:

uk02878- you say - Vanguard as a provider they will close your account as soon as you move overseas (SIPP in drawdown, ISA, GIA).= I didn't know that!
 How about others? If one is still paying taxes in the UK such as tax on rent of property etc- would they be able to keep the a/c open?

From Vanguard's April 2020 Client Terms:

1.3.2 Opening an Account means you accept these Terms and you confirm to us that you meet the conditions above relevant to your Product. Your Account may be restricted if your residency or tax status change. This means that you may not be able to make new investments, and that we will only provide administrative and record-keeping services in return for the applicable Charges. For your Pension Account this may continue until you become eligible to take Benefits from the Scheme. For an ISA or a General Account only, we may alternatively sell your Vanguard Funds and close your Account if you cease to be a UK resident.

[Deleted User]

andy001 said:

uk02878- you say - Vanguard as a provider they will close your account as soon as you move overseas (SIPP in drawdown, ISA, GIA).= I didn't know that!
 How about others? If one is still paying taxes in the UK such as tax on rent of property etc- would they be able to keep the a/c open?

Dox nailed it with the reply - all of the others seem to be fine. 

[Deleted User]

I did exactly that, having moved to Canada.
Dont see a downside to having contributed to a pension in the UK.  You get all the (substantial) tax benefits and employer’s contributions at the time of investment.  After moving abroad the pensions continue to grow tax free, which is another benefit. No further contributions are permitted.  

When time comes to crystallize and withdraw, I will be taxed on it in Canada, as if it were normal income. The one and only disadvantage vs treatment of withdrawals for UK residents is that there is no 25% tax free “lump sum”, which is a further tax discount. There can also be some extra  costs for moving the instalments across borders and charges relating to currency exchange but I found a way to eliminate these.  

There is also a risk of adverse changes in cross border taxation regime or some other rules. This is likely small. 

Overall, there is a net benefit to maxing your pension contributions regardless of whether you move abroad in the future

[Deleted User]

And Vanguard will treat your pension/SIPP in exactly the same manner as the other brokers - you stay invested and protected from the ongoing taxation but no further contributions are permitted. Not that you would want to contribute further unless you are a UK tax resident.

nigelbb

Don't forget to continue paying National Insurance contributions when you move abroad. Short of of buying a winning lottery ticket it will be the best investment you will ever make. As you are moving abroad you should be eligible to pay Class 2 contributions at £3/week. Each year of contributions buys a pension of £250. Average life expectancy at retirement is over 20 years so that will be worth over £5000 to you all for an investment of about £150. Continue for the next 32 years for a full pension of about £9000/year all for a total cost of under £5000.

macman

Don't forget that in many countries around the world, your UK state pension will be frozen at the level it is when you emigrate. There will be no annual uplift unless there is a reciprocal agreement in place.
Notably, Canada and New Zealand have no agreements in place with the UK. The USA does.

[Deleted User]

macman said:

Don't forget that in many countries around the world, your UK state pension will be frozen at the level it is when you emigrate. There will be no annual uplift unless there is a reciprocal agreement in place.
Notably, Canada and New Zealand have no agreements in place with the UK. The USA does.

Not quite. It will be frozen at the level it will be when you start receiving it at pensionable age (assuming you leave Britain before retiring).  

There is an agreement between UK and Canada but it does not impose state pension indexation requirement on the UK.  This has nothing to do with an agreement; Canada indexes state pensions regardless of where you live. 

nigelbb

Deleted_User said:

macman said:

Don't forget that in many countries around the world, your UK state pension will be frozen at the level it is when you emigrate. There will be no annual uplift unless there is a reciprocal agreement in place.
Notably, Canada and New Zealand have no agreements in place with the UK. The USA does.

Not quite. It will be frozen at the level it will be when you start receiving it at pensionable age (assuming you leave Britain before retiring).  

There is an agreement between UK and Canada but it does not impose state pension indexation requirement on the UK.  This has nothing to do with an agreement; Canada indexes state pensions regardless of where you live. 

Even if the state pension received no uprating after payment started it's still an extraordinary bargain to get (using current figures) a pension of about £9,000/year (over £180,000 over an average lifetime without indexation) for an outlay of under £5,000.